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Our love-hate relationship with global warming: Cohn

The rules are opaque, overly complex and tough to explain. It’s a stealth tax by any name.

But after years of delay, Ontario has belatedly joined the global fight against global warming. The timing couldn’t be better both economically and politically, even if it’s a little late environmentally.

Thursday’s budget has formally committed Ontario’s Liberals to what they first promised — and then postponed — eight years ago: A coherent plan to reduce greenhouse gas emissions.

Back in 2008, Queen’s Park was spooked by the electoral humiliation of the federal Liberals for proposing a national carbon tax. Fearful of getting too far ahead of the carbon curve, the province delayed. Now the world has changed, and delay is paying dividends. Carbon pricing will soon be the law of the land, and it is gathering momentum across the planet.

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Other governments, notably Quebec, have worked the kinks out of cap-and-trade in the intervening years. And while awareness of global warming is rising, fossil fuels are plunging in price, making it an easier political sell.

Under Ontario’s plan, polluters will pay a price for every tonne of CO2 they dump in the atmosphere, generating $1.9 billion annually. The appeal for politicians is that cap-and-trade is essentially a hidden tax, passed on to consumers almost unnoticed.

Gasoline prices will initially rise by a mere 4.3 cents a litre, and home heating bills by an average $5 a month for natural gas. Given the volatility of fuel prices, the hike will be almost imperceptible.

All that said, it’s still hard to love cap-and-trade. Taxpayers have every right to be wary of governments exploiting the cash flow and creating ever more incomprehensible complexity.

Will Queen’s Park bungle the auctioning, buying, swapping and pricing of carbon credits? Will it aggressively lower emissions caps while raising prices for polluters in subsequent years?

If you believe global warming is here — as the opposition parties concede — the question is what’s the alternative? Stephen Harper’s federal Conservatives (including current Ontario PC Leader Patrick Brown) teamed up with Jack Layton’s NDP to trash the simpler carbon tax proposed by then Liberal leader Stéphane Dion in 2008.

Despite its elegant simplicity and transparency, a carbon tax has its own challenges. Rather than directly lowering carbon emissions, it merely deters them indirectly through taxation.

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Offending companies can continue polluting, viewing the tax as a cost of doing business (just as courier firms view parking tickets as a nuisance). It also risks disadvantaging local companies against foreign competitors that remain unburdened by such taxation, polluting with impunity.

By contrast, cap-and-trade imposes a hard “cap” on overall emissions, lowering the ceiling every year without raising the political temperature. Companies in trade-sensitive, energy-intensive sectors that risk losing out to cross-border rivals are eligible for free or discounted carbon allowances to remain competitive.

If cap-and-trade deals with some of the shortcomings of a pure carbon tax, the details are still devilishly complicated. But by waiting all this time to join, Ontario is being rewarded for its tardiness: Quebec and Queen’s Park have been comparing notes ever since our provincial neighbour created a joint carbon market with California (four years ahead of us), learning lessons from the mistakes of others.

While environmental groups are praising Ontario for finally joining in, opposition parties raise a legitimate question: Are trade-sensitive industries getting a free ride or favoured treatment in their carbon allocations?

The provincial Liberals will always remain under a cloud over carbon, given their past bungling of gas-fired power plants. One way for Premier Kathleen Wynne to inspire greater public confidence is to be more transparent in her interactions with polluters — by cleaning up fundraising at the same time.

How can Liberal politicians go cap in hand for donations one day, then hand out cap-and-trade credits the next? Will they give out carbon credits in exchange for credit card contributions at campaign time?

Cap-and-trade, and trading in influence, will be seen as two sides of the same coin for as long as this government takes big money from big donors — and big polluters. The best way for Wynne’s Liberals to regain credibility as stewards of our environment would be to clean up Ontario’s political climate at the same time.

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